Baby, we got a bubble!?

[BrianPersaud]

that would have to be one questionable lender who would lend based on a property one does not even own. Unless the gains was very significant (say 25% increase in price which has happened over the last 3 years on paper at least) this is risky for both lender and borrower. Unless the lender satisfies himself that the borrower has other funds(may have other assets tied up for eg. stock) so that there is something that can be sold, this would be a very frightening(and highly stupid akin to the nonsense tht went on in the US) way of conducting business. Plus, with the exception of a few closeouts by developers, they usually do not offer 5% down and then it presumably would require CMHC coverage(insurance) which I believe adds about another 2-3 % on average to the cost of a property. Very disturbing if it turns out to be widespread. Unfortunately, CDR I don't think there is anyway other than to anecdotally to arrive at accurate figures. I hope your example is the exception and not the rule or we will be in deep trouble however while there are a few "gamblers" out there who would bet on a straight up trajectory of the market, I believe that the majority of investors cannot and therefore would not take such risks (coincidently the only thing saving those reckless individuals).

This is not neccessarily true. Talk with a mortgage broker and they will show you how. Money is cheap right now, if you played a little bit of offense with your defense by
- running your numbers with a 5%-6% interest rate today you would have great cash flow(banks are doing it now anyway if they go with the 5 year posted rate)
and
- if you bought in a growing market with some capital gains built in


you will be gold

 

[nandito]

so we're not in a bubble then ?

 

[urbandreamer]

Yes, I know it's the February blahs, but still, am I the only one shocked by the increase in listings, especially single family housing, and quite a few under $400k homes listed? I think it may be a sign the end of the world is near... (Take a look at Vancouver's listings as well--vast number available compared to just 2 months ago.)

 

[CN Tower]

Added tip: buy a property undermarket value today so you have a built in capital gain.

Are you kidding me? Who are you dude, Tom Vu's kid?

 

[azureray]

Yes, I know it's the February blahs, but still, am I the only one shocked by the increase in listings, especially single family housing, and quite a few under $400k homes listed? I think it may be a sign the end of the world is near... (Take a look at Vancouver's listings as well--vast number available compared to just 2 months ago.)

Thats because everyone is talking about a bubble...and then, everyone wants to sell before the bubble burst!!! It's all speculations...we saw speculative buying...now its speculative selling...all by media!!!

 

[urbandreamer]

"Relationship Manager"? So Brian, you date real estate agents? Set me up with one of those hot real estate girls that hang out at Blow Fish.

Re: "It's all speculations...we saw speculative buying...now its speculative selling...all by media!!!"

No, this is real "live" MLS data I'm looking at, not media spin. Huge increase in listings (I am an MLS geek) means only one thing--prices will stabilize or (what I think) go down! Average guy on the street lags trend by 6-8 months, just like average stock market retail investor lags the "street" by 6-8 months...just in time for a "street" crash. Retail side of stock market is seeing a huge increase, while smart money has sold down. Same thing is happening, imho, in the real estate market now!

I will even go crazy here: 21 Feb 2010 Toronto real estate market crash alert!

 

[CN Tower]

"Relationship Manager"? So Brian, you date real estate agents? Set me up with one of those hot real estate girls that hang out at Blow Fish.

Re: "t's all speculations...we saw speculative buying...now its speculative selling...all by media!!!"

No, this is real "live" MLS data I'm looking at, not media spin. Huge increase in listings (I am an MLS geek) means only one thing--prices will stabilize or (what I think) go down!

Hey Dreamer take a tip from the master, the REAL Tom Vu:

"Do you think these girls like me? NO, they like my money!"

 

[azureray]

Hey Dreamer take a tip from the master, the REAL Tom Vu:

"Do you think these girls like me? NO, they like my money!"

Although I don't tend to agree Brian's view, a realtor's view...I don't think you guys are on topic...personal attack on job title or relationship is not funny~!

 

[urbandreamer]

Wasn't meant to be a personal attack. I was being funny.

Of course the Blow Fish (etc) agent girls want my money.

 

[CN Tower]

Although I don't tend to agree Brian's view, a realtor's view...I don't think you guys are on topic...personal attack on job title or relationship is not funny~!

I'm not attacking him either. Also trying to poke fun at the idea that you can steal a property today, particularly in this inflated market. The concept sounds ridiculous and conjures up memories of 1980's informercials on get rich quick schemes.

I don't believe we are in a real estate bubble. I believe we are in a debt bubble and an offshore money bubble. The finance minister's announcement last week shroud curtail both these things.

 

[azureray]

I'm not attacking him either. Also trying to poke fun at the idea that you can steal a property today, particularly in this inflated market. The concept sounds ridiculous and conjures up memories of 1980's informercials on get rich quick schemes.

I don't believe we are in a real estate bubble. I believe we are in a debt bubble and an offshore money bubble. The finance minister's announcement last week shroud curtail both these things.

Back to the topic...with the annoucement last week, which seems to be welcomed by many...now my realtor is telling me, it is in fact creating a "mini bubble". From now to April, all those first time buyers or investors depending on the 5% are rushing into the market before the 5% is finlly gone!

I have noticed listings are selling faster than ever, despite the increase of inventory...I think the goverment leaving too long of a gap between the annoucement and the action.

 

[interested]

Back to the topic...with the annoucement last week, which seems to be welcomed by many...now my realtor is telling me, it is in fact creating a "mini bubble". From now to April, all those first time buyers or investors depending on the 5% are rushing into the market before the 5% is finlly gone!

I have noticed listings are selling faster than ever, despite the increase of inventory...I think the goverment leaving too long of a gap between the annoucement and the action.

Actually, I saw on a remax site that sales to listing went from 80% to44% from Dec to January. This is a huge change and I believe represents the start of the turn around from sellers back towards a buyers market. I realize balanced is about 30% but if this continues it will be back in buyer's territory very quickly. You may be right about the mini bubble but these are the ones most at risk. Last in at the party, sort of like the last person in on a Ponzi scheme.

I am not saying real estate is a Ponzi scheme. I am simply saying people who cling to this notion that real estate is not a commodity that can decrease in value are not seeing the whole picture.

 

[nandito]

i'm starting to think there's way too many people waiting by the sideline for the market to really crash.

 

[interested]

This is not neccessarily true. Talk with a mortgage broker and they will show you how. Money is cheap right now, if you played a little bit of offense with your defense by
- running your numbers with a 5%-6% interest rate today you would have great cash flow(banks are doing it now anyway if they go with the 5 year posted rate)
and
- if you bought in a growing market with some capital gains built in


you will be gold

We have just had 10 years of great growth. Just as a rising tide raises all ships, it was not difficult to look brilliant with this strategy until now. Maybe it will continue, maybe it won't. I don't claim to be that smart to know. The suggestion that you buy under market value is a great one. Again, to use a stock market analogy, buy low sell high. Great advise, just something most people don't do very well. If it was that easy, everyone would be multimillionaires. Talking to a mortgage broker who has a vested interest to get you a mortgage and have you lever yourself is hardly sound investment advise. Of course this works in an advancing market. Let's see when it corrects. I am quite sure there will be a correction and it is exactly those levered people who potentially upset the apple cart. When deleveraging occurs in anything, it is ugly. Most people will tolerate 5%. Look at the US. People who had 30% equity now are in trouble as their mortgage is under water caused by the others levered having problems and walking away. I realize there are alot of differences in the US vs. Canada. My point is that deleveragling when it occurs hits those who took the most risk.
the 5-6% cash flow at least for the downtown TO
market is not going to cover or barely cover condo fees and taxes and mortgage and what happens if there is say a 10% decrease in price and the individual has to remortgage?

 

[BrianPersaud]

Long day so I'm just going to type my thoughts as they come into my head.

Azureray. Thanks for requesting to keep it clean...and yes, I do have an agent mindset to buy...but I caution it always with buy smart. For years, I've seen people get ripped apart on these forums for being a little contrarian and saying to buy so I do my best to explain why I do.


Urbandreamer, I'm sure you'll find a girl that will love you for you.

CN Tower, It may not be your intention, but your comments can make you come across as a bit of a dick. I guess your initial Wal-Mart comment where you said I was full of shit was deleted... but this new one...Funny...I had to Google Tom Vu. I'm definitely not selling you on taking seminars (gag).

Anyways buying property undermarket value happens all the time. Before the show two weeks ago, I went to an agent’s office to put an offer on a property $40k undermarket value...some one snapped it up an hour before I came.

crazy story of people talking crap: I approached an agent about doing a deal, he tells me that no one does undermarket deals anymore, and just getting access to regular deals is value in itself. So the next day, I dropped in an office of another vendor I was negotiating with that suddenly went cold...the reason why the vendor went cold was because that agent I spoke to the day prior scooped me of the deal. People are really subversive out there and will lie to get you off the trail of finding deals.

Buying real estate is not like trading stocks, you have to get down and dirty...get involved... pound the payment...diligently seek out deals and follow up on them fast. Looking for property in this city is tough. I've been chased by dogs, been screamed at, and thrown out of buildings..been out at all kinds of weather. But it's also a lot of fun, you get to meet a lot of amazing people and hear their stories about hard work and success

As for finding undermarket deals. It takes skill in negotiating, persuading...understanding where people are coming from....but make no mistake, these deals do happen.

I'm curious CN tower, how active are you in the market? Are you buying right now? Do you own? Why do you think finding a property under market value is hard? Have you tried looking? Who are you speaking to?

Back to the topic, is there a bubble? To me a bubble is where the prices are inflated 30%-100% of where the fundamentals are saying. The only argument I hear are that rates are too low and unemployment is high....well that may be true, but real estate is not something linear where a+b+c=bubble, its a functional system that is the culmination of many factors acting in unison. Today, like in 2005, there are factors for and against buying...if you go back into this topic you can get my opinions.